Digital Assets: More than just crypto

I’ve been a traditional investor for almost 20 years, spending most of my career analysing markets and macro-economic indicators. The new frontier of Web 3.0 was something I’ve observed from a distance, periodically dipping my toe via venture investments and – gasp – crypto.

Therefore the world of digital assets and Web 3.0 is relatively new for me.

Via this blog, I’ve decided to share the learnings from my newbie digital asset journey. From the false myths I’ve discovered to the new concepts I’ve learnt, my lens offers the perspective of a traditional banker venturing into the world of Web 3.0.

I'll start today with one of the first things I drilled myself on.

Crypto is a type of Digital Asset, but not all Digital Assets are crypto

Crypto. Human ingenuity as the next evolution of money? Scrooge of the fintech world, littered with scandal and loss. Which one is it? Probably a bit of both but that’s not really the point.

It’s no surprise many people equate cryptocurrencies – the most famous of which is Bitcoin – with digital assets.

Crypto has been the biggest advertisement, good or bad, for the world of digital assets. After all, there’s no better tool to aid adoption than to offer an opportunity to get rich quick. At their own (very significant risk) of course.

Early adopters of Bitcoin who invested $1000 back in 2013 and held on till today would have made about $230,000. That same amount would have been worth over $400,000 at its peak in 2021.

Chart: Crypto’s rise (and fall) has been a great advertisement for blockchain and DLT

Despite this impressive rise, crypto is just one of many use cases of blockchain and distributed ledger technology (the tech that underpins crypto). Remember blockchain and DLT is fundamentally just a new way of recording information.

In today's world, assets that people hold are ultimately records of information. Investment balances, deposits, loans are today digital entries on a ledger. DLT and blockchain simply are new innovative ways of recording information, and this tech gives rise to digital assets.

Digital assets are basically a digital (obviously) representation of value stored on distributed ledger or blockchain.

If we agree on this board definition, then we start to see how everything is pieced together. Cryptocurrencies fall into this definition. You can own a token representing your ownership interest of value that is recorded on blockchain, whether that is Bitcoin or any other network.

Other types of assets can also be recorded on blockchain or DLT. For example, ownership of bonds can be recorded with “tokens” issued representing this. Same with physical assets like gold or real estate.

Back in 2014, long before I started working on digital assets, I was on a train from London to Canterbury. Sitting next to me was a bond trader who was reading a sell-side research report on the benefits of distributed ledger technology. As he was leaving, he threw me the 200 page report, which basically kickstarted my journey into this space.

His parting words to me were,

“Bitcoin's not the point. Distributed ledger technology is the magic.”

Almost a decade later, these words arguably hold true. What comes next? Time will tell.?